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Ireland among six rich countries in September 2007 where housing was classified as unaffordable

The 2008 4th Edition Demographia International Housing Affordability Survey rates the housing affordability situation of 227 urban markets of the rich countries United Kingdom (28 markets), Republic of Ireland (6), Canada (29), the United States of America (129), Australia (28) and New Zealand (7).

This expands on the 159 urban markets assessed in the 2007 Survey.

The method employed in assessing housing affordability is the “Median Multiple”, where for each individual market, the median house price is divided by the median annual household income. The internationally recognised standard of “acceptable affordability” is that house prices should not exceed three times annual household incomes.

The “Median Multiple” method is recommended by the United Nations and World Bank.

Demographia rates urban markets on the basis that those that are three times annual household income or less are “affordable”; four and less “moderately unaffordable”; five and less “seriously unaffordable” and over five times household incomes “severely unaffordable”.

Overall – New Zealand and Australian urban markets have the worst housing affordability at 6.3 time’s annual household earnings, followed by the United Kingdom at 5.5 time’s, Ireland 4.7, the United States 3.6 times and Canada 3.1 times annual household earnings.

When interest costs on mortgages are added – New Zealanders are in the worst position. Based on local interest rates, a 100% 30 year mortgage to illustrate a consistent example – a New Zealand household can expect 18.6 years of income to go towards house cost and mortgage interest (excluding rates, taxes, maintenance and other costs); Australians 17.9 years, the British 14.1 years: the Irish 9.6 years; the Americans 8.3 years and the Canadians 7.9 years.

Within the affordable urban markets , when house price and mortgage interest are combined, a household in Atlanta can expect 6.6 years of annual income, Dallas Fort Worth  5.8 times and Indianapolis just 5.2 times annual household income.

"The situation is absurd, considering that when a New Zealand or Australian household buy a house, they are paying more for the actual house than their counterparts in Atlanta, Houston, Dallas Fort Worth and Indianapolis are paying for their houses and mortgage interest charges combined” said Wendell Cox, co author of the Annual Demographia Survey – adding “Little wonder the younger generation of New Zealanders and Australians are referred to as the “lost generation to homeownership”.

Cox’s colleague and co author of the Annual Survey Hugh Pavletich said that the evidence with respect to the causes of the housing affordability crisis that too many urban markets have inflicted on themselves - is clear, overwhelming and irrefutable.

“With urgency - they must allow affordable housing to be built on their urban fringes – and stop playing games with young people’s lives” said Pavletich.

 

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